Walmart Inc. reported its slowest U.S. sales growth in over six years. The company saw a rise of just 2.6% in the second quarter, missing analysts' expectations of 3.7%. The disappointing results, announced on August 20, caused a sharp drop in the company's stock. Shares fell about 10% to a nine-month low of $103 each. Walmart attributed the slowdown to rising fuel prices and a drop in consumer spending, especially in non-essential categories.
Tariff Refunds and Price Cuts
Despite the sales miss, Walmart received nearly all of a $2.9 billion tariff refund. The company plans to reinvest this money into price cuts and improvements in customer experience. CEO John Furner said, "Customers are feeling some pressure, so we're proud of our investments." Walmart has already cut prices on 11,000 items, focusing on groceries and general merchandise. CFO John David Rainey noted that the effects of these price cuts might not show in sales growth until the next quarter.
Walmart's revenue for the quarter reached $187.9 billion, up 5.9% from last year. Adjusted earnings per share were $0.81, which exceeded forecasts. However, the company's forecast for third-quarter earnings fell short of Wall Street estimates. Expectations are set between $0.62 and $0.64 per share, compared to the $0.68 analysts had predicted.
Consumer Sentiment and Market Trends
The results show a change in consumer behavior. Shoppers are prioritizing essential items over non-essential spending as inflation continues. Rainey noted that when gas prices exceed $4 per gallon, it can affect consumer spending. This trend raises concerns about the overall health of U.S. households and their spending power ahead of the back-to-school and holiday seasons.
The slowdown in sales growth may impact retail stocks, especially those dependent on discretionary spending. Investors will likely watch Walmart's ability to attract price-sensitive shoppers in the coming months. The upcoming third-quarter earnings report will provide more insights into consumer behavior and the effectiveness of Walmart's pricing strategies.
Related coverage: US Retail Sales Fall 0.6% in July Amid Consumer Fatigue.
Based on reporting by: businessinsider.com, proactiveinvestors.co.uk